Mergers and acquisitions trend continues among larger health organizations

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Partnerships among larger hospitals and healthcare systems remain on the rise with no end in sight, according to an analysis by Kaufman Hall.

The impressive appetite for mergers and acquisitions among large healthcare organizations continued unabated through the first half of 2017.

In its analysis of the second quarter of 2017, Kaufman, Hall & Associates found a 15% rise in M&A transactions among hospitals and healthcare systems compared to the second quarter of 2016. That marks the continuation of a trend seen in the first quarter, and more broadly since 2010.

The first half of the year has also seen six transactions featuring organizations with revenues in the $1 billion range, including the blockbuster merger between Steward Health Care and IASIS Healthcare LLC, which in May produced the single largest private for-profit hospital operation in the country.

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The trend toward increasing numbers of partnerships among larger healthcare organizations isn’t likely to level off, either. Patrick Allen, managing director at Kaufman Hall, doesn’t see any sign that partnerships will cool down in the foreseeable future. “As the field of potential partners evolves, leaders of many larger health systems are thinking strategically about how best to build the scale and capabilities needed to remain competitive in a rapidly changing healthcare environment,” he says.

Allen counts continued political uncertainty around federal healthcare policy and the industry-wide shift toward alternative care delivery models among the most prominent forces motivating larger organizations to seek stability through expanding their operations.

Some key takeaways from the report:

  • Year-to-date transactions have totaled 58, up from 52 in the previous year’s period.
  • Transactions in the second quarter rose from 27 last year to 31 this year.
  • Not-for-profits accounted for 22 of the transactions in the second quarter of 2017, while eight involved for-profit organizations. One transaction combined not-for-profit and for-profit organizations.
  • Most of the activity in the quarter centered around hospitals in Pennsylvania and Texas, which played host to four deals per state.